Hartford Business Journal

www.HartfordBusiness.com • May 20, 2019 • Hartford Business Journal 15 place trends. In a wide-ranging interview with HBJ, Lehman, 41, also talked about the need for state government to consider public-private partnerships; ease its regulatory burden on business; lever- age investment in and development of federally sanctioned Opportunity Zones; and continue to promote entre- preneurship and innovation. Since he assumed office, Lehman says he has spent time canvassing state lawmakers, local mayors and econom- ic-development specialists, business owners and professional organizations, corporate managers, and members of his DECD staff, to get a better sense of the issues important to them. Push for cities A married father of two, the New Jer- sey native spends several nights a week in an East Hartford hotel. He says he got to know and appreciate Connecticut — and its "beautifully landscaped geog- raphy" — through his wife, a Westport native, on weekend visits upstate from their Manhattan residence. Ironically, Lehman, who says he and his family moved to suburban Westport to escape life in New York City, now extols the virtues of urban living, citing Hartford's "live, work, play'' ambitions. Indeed, a cornerstone of his plan to revitalize Connecticut's economy is to focus on building up its cities. He says Connecticut's lack of a metropolis the size of Boston, New York or San Francisco is a hindrance. However, for the urban areas it has, the state must make them appealing not only to investors but young Mil- lennials and retired Baby Boomers. U.S. cities, Lehman says, underwent a period in the 1970s and '80s in which they were vilified as incubators of crime and poverty. That gave a state like Connecticut, known for its subur- ban lifestyle, an advantage in attract- ing people and companies like General Electric, which moved from New York to Fairfield in the early 1970s. Today, however, that narrative has been upended as cities are considered safer destinations and magnets to a new generation of young workers for whom living and working in an urban setting is an amenity. "Personally, I think there's been a macroshift in terms of the forces that put people into Connecticut, or into the suburbs," he said. "The trend toward cities is very, very real and we need to address it." One of the challenges Lehman faces in his efforts to boost cities is limited state funding. Hartford's downtown has undergone significant changes over the last decade thanks to tens of millions of dollars invested by the Capi- tal Region Development Authority — a quasi-public agency created under the Malloy administration — into convert- ing old or vacant office buildings into more than 1,000 new apartments. That's helped boost downtown's residential population and also enticed some suburban employers to move to the center city to be closer to a grow- ing talent pool. Millions more dollars have been invested in various innovation hubs downtown that have helped attract new startups to Hartford. However, Lamont's debt diet, in which he has pledged to limit the state's borrowing, has slowed exist- ing fund allocations to CRDA and left uncertain how much money the agency, and other state-backed efforts or programs, will have to work with in the future. The reality is, progress made in re- vitalizing Hartford's downtown would not have happened without state support, and Connecticut's limited fi- nancial flexibility could make it harder to stimulate growth in the capital and other cities going forward. Lehman, who sits on CRDA's board, said he's a big fan of the work the quasi- public agency has done in Hartford, but that it's imperative for cities to lever- age as much private dollars as possible. That's one reason he's bullish about promoting the federal Opportunity Zone program, which was created as part of the 2017 federal tax reform law to spur realty- and business-develop- ment in the U.S.' neediest communities. It allows taxpayers who invest in qualified Opportunity Zones to be eli- gible for capital gains tax incentives. Besides investors, anticipated benefi- ciaries are the 72 low-income neigh- borhoods in 27 municipalities across Connecticut that have been tagged as OZs. That includes zones in Hartford, West Hartford, East Hartford, Bristol, Middletown, Meriden and Manchester. Lehman said he's watching closely a bill in the state legislature that would further leverage OZ investments, but mostly he wants DECD to be a con- vener of deals, maybe even creating a centralized website or marketplace for municipalities and developers to identify shovel-ready projects. "We should be a 'go-to' source for Op- portunity Zones … to make sure those investments get through the pipeline as quickly as possible," he said. He also said DECD needs to work more closely with local planning and zoning boards to understand their growth strat- egies and how the state could help. 'Earn as you go' Maybe one of the biggest shifts under the Lamont administration's economic-development strategy is how the state plans to use incentives to stimulate job growth and development. The Malloy administration trans- formed the state's jobs strategy, aggressively ramping up corporate incentives — to the tune of more than $650 million in loans and grants and hundreds of millions more in tax credits — to entice private-sector companies to retain and add jobs in a state desperate for growth. Some of that aid was in the form of grant money or forgivable loans that companies benefited from up front, before they created jobs or made cer- tain investments. That required the state to borrow money in order to provide those incen- tives, which were panned as corporate welfare by some. Lehman said he wants the state to move to more of an "earn-as-you-go" system, meaning employers won't reap state incentives until they've cre- ated a certain number of jobs or made a certain level of investment. That prevents the state from having to borrow money to incentivize job growth, or from having to clawback funds from companies that failed to live up to their deals. "The company and the private sector are going to come up with the money they need to create those jobs and they will earn that incentive over time," Lehman said. He said most states structure their incentives that way, and he's working to change Connecticut policy. some consensus we can build on reducing some of that. HBJ: Gov. Lamont has said he wants to have a pro-business administration but then he supports paid family medical leave and a higher minimum wage, which have caught the ire of the busi- ness community. Is he saying one thing and doing another? LEHMAN: I don't think so. I think there's a balance out there. And I think this comes down to who we are and what kind of state we are. I think you can be pro-business and have paid family medical leave. You can be pro-business and have the minimum wage that we have. And listen, you're never going to please 100 percent of the people. I get that. We are a progressive state and I think you can be progressive and still pro- business. So in my mind, it comes down to striking the right balance, because there is a cost to those programs. HBJ: Can you talk about your ex- perience on Wall Street and how that can help you navigate your current job? LEHMAN: I worked in finan- cial markets, the bond market, for roughly 10 or 15 years, in various degrees. Then I worked in real- estate lending and municipal-finance capacities. So, I have a pretty diverse back- ground in finance, which I think will be useful in terms of thinking about things like return on investment. Are we spending taxpayer money in a very efficient way? I want to make sure we're delivering great returns to taxpayers. We need to be very mindful and deliver services at a very low cost. I'm very sensitive to that point. I think that's one of the things government should be focused on. HBJ: What's your experience with public-private partnerships (P3s) and what are the biggest opportunities you see for them in state government? LEHMAN: I worked with a team that did public-private partnerships and I've seen them done before. I understand how they're financed. I understand how the private sector thinks about them. The benefit of P3s is there is a risk allocation to the private sector. The benefit to the state is you're getting capital day one and the risk of manag- ing a certain property can be put off to the private sector. But there's a tradeoff. The cost of capital from infrastructure investors is higher than the state's current cost of borrowing. The real clear area where P3s work, and where I think you'll see more of it across the country, is in infrastructure. If you think about operating our roads, or if tolls do happen, those are applica- tions where you could potentially tap private-sector money to basically help fund construction of that and the state wouldn't need to take that risk. You can read more of this Q&A online at http://www.hartfordbusiness.com/. Former Webster Bank CEO James Smith is co-chair of the Connecticut Economic Resource Center and working with David Lehman on economic-development efforts. HBJ PHOTO | GREG BORDONARO David Lehman, Commissioner, Department of Economic and Community Development

• Cover